MCWG Strategic Plan 2014

Strategic Plan 2014

More Collaboration, Better Outcomes

Fo

Who We Are In the spring of 2011, the eight members of the Microfinance CEO Working Group first began meeting to have regular, informal conversations about the future of the microfinance sector as it had matured and faced new challenges. The CEOs found that they shared many of the same values and concerns, including a desire to work together to help improve their own networks and to help advance the industry as a whole. From these conversations emerged the Microfinance CEO Working Group, made up of the CEOs (or Board Chairs) of the following organizations, all of which work globally: 1. Accion 2. FINCA International 3. Freedom from Hunger 4. Grameen Foundation 5. Opportunity International 6. Pro Mujer 7. VisionFund International 8. Women’s World Banking Together, these organizations represent more than 230 microfinance institutions (MFIs) operating in 68 countries around the world. They provide services to more than 43 million people.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 2 of 16

Our Vision: A world in which microfinance has a maximum beneficial impact on the lives of the poor and underserved and is recognized for its contributions to society.

Our Mission: To support the positive development of our member organizations and the microfinance industry at large so the sector can reach its full potential of bringing financial and related services to those who have traditionally been excluded.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 3 of 16

Our Commitments: 1. Client Protection: Encourage all affiliates to implement the client protection principles as they progress toward Smart Campaign certification. Our goal is that all will be on a pathway toward certification by the end of 2014.

2. Pricing Transparency: Motivate our affiliates to commit to pricing transparency by agreeing to publish their pricing data using standard methodologies, such as those developed by MicroFinance Transparency, in order to allow investors and clients to make informed decisions.

3. Social Performance: Promote the Social Performance Task Force’s “Universal Standards for Social Performance Management” among our affiliates and commit to supporting their compliance.

4. Outcomes: Share the research we each have done on client outcomes with one another and with the industry and encourage our affiliates to report outcomes relevant to their goals and objectives.

5. Global Appeal: Encourage our affiliates to sign the Global Appeal for Responsible Microfinance as an outward symbol of their commitment to the principles embodied in the above initiatives.

6. Investors: Encourage our affiliates’ equity investors to promote the same five initiatives by including them as criteria for investment and our affiliates’ lenders to encourage the adoption of comfort letters also promoting the same five initiatives.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 4 of 16

Our Core Beliefs  We are committed to serving and benefiting the poor and underserved.  We are committed to achieving both financial and social impact, ethically.  We aim to serve the unbanked in a sustainable and responsible manner. Serving such a large population means that a variety of approaches to microfinance are necessary.  Appropriately protecting clients is essential for any business, but it is even more fundamental for those of us who serve vulnerable populations.  We have a responsibility to the communities we serve and the employees we represent.  We seek to fulfill our social missions through monitoring and evaluation of our effect on clients’ lives.  We believe that our work is far from done: significant industry-building efforts are still required.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 5 of 16

Our Strategy  Advocate collectively in support of Responsible Microfinance.  Strengthen the industry by encouraging the adoption of industry standards.  Strengthen the institutions in our networks by ensuring the implementation of best practices.  Build relationships that encourage collaboration among key stakeholders in the industry.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 6 of 16

What We Have Achieved To Date The following are the principal achievements of the Working Group to date: 1. Published the Road Map for the Microfinance Industry: Focusing on Responsible and Client-Centered Microfinance in January 2012 as a statement of principle and intent.

2. Promoted and supported proactively the three principal initiatives working to raise standards across the microfinance industry: a. The Smart Campaign b. MicroFinance Transparency c. The Social Performance Task Force’s (SPTF’s) Universal Standards for Social Performance Management (USSPM) 3. Beta tested the Universal Standards for Social Performance Management in a sample of 21 of our affiliates and produced a report that was used extensively in the establishment of the final version of the standards.

4. Actively encouraged the adoption of the USSPM, including the client protection principles, within our own networks and across the industry as a whole. (Ten of the first fourteen MFIs certified in client protection are affiliates of our networks.)

5. Developed and endorsed the Global Appeal for Responsible Microfinance and promoted it throughout the sector.

6. Facilitated the development of functional peer groups across our membership, which meet regularly to share best practices and policies, to assist the CEOs in meeting their objectives on behalf of the sector and to develop solutions to common problems.1 7. Documented the research on outcomes that each network has carried out in order to advance to a new phase in the monitoring and management of client outcomes.

8. Engaged with policymakers and other stakeholders in India, Mexico, Zambia and Guatemala to promote a pathway to Responsible Microfinance and avert client overindebtedness.

1

We currently have peer groups of leaders in the following functional areas: human resources, risk management, social performance, communications, legal services, and finance/tax. We are hoping to start one in information technology.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 7 of 16

Our Objectives 1. Practice Responsible Microfinance: Embed the principles of client protection, pricing transparency and social performance management in the processes of the 230 plus affiliates that make up our networks over the next 3 to 5 years.

A responsible microfinance institution, in our definition, is one that, at a minimum:  Does all in its power to protect its clients from harm;  Is transparent about the fees and interest rates it charges (or pays, in the case of deposits); and  Monitors its effectiveness in achieving desired client-level outcomes.

An MFI can achieve this by complying with the industry-developed standards of the Smart Campaign, MicroFinance Transparency and the Social Performance Task Force.

We believe that now is the time to turn to implementing these standards. In the past several years the Smart Campaign and SPTF have developed the standards – known as the Universal Standards of Social Performance Management. They have also identified the essential practices, the indicators, the guidelines and the best practices that allow an MFI to assess whether it is indeed “responsible”. MicroFinance Transparency has provided a methodology by which one can compare the interest rates charged by different MFIs in the same country.

In addition, the industry has put years of work into developing the toolkits (selfassessment tools, resource documents, websites) that MFIs need to implement the USSPM and the human resources (assessors, raters, technical assistance providers) that can assist MFIs in assessing their performance and demonstrating that they are practicing Responsible Microfinance. For instance, MFIs can demonstrate compliance with the client protection practices by becoming certified by the Smart Campaign. A social rating allows an institution to demonstrate its performance on all the Universal Standards including those related to client protection.

At the most fundamental level, these initiatives have defined what it means to put clients at the center of its work. MFIs that focus on clients continually ask themselves: How do we deliver value for our clients? To do this, they:  Articulate the outcomes they are seeking;  Define the metrics they will use to monitor whether those outcomes are achieved;  Continuously measure their performance; and  Make changes to their products and practices based on the information they receive from this monitoring.

Helping our 230 plus affiliates to become leaders in the practice of Responsible Microfinance is our highest priority and most challenging objective for 2014.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 8 of 16

Some of our MFIs have already demonstrated that they can achieve this. Of the fourteen MFIs that have been certified by the Smart Campaign, ten of them are from one of our member networks. Some of our MFIs participated in the beta test of the Universal Standards and provided a report that was used in refining and revising the final set of standards.

Still, the readiness to be certified and to demonstrate the practice of Responsible Microfinance varies widely across our networks. More than 50 percent are clearly not yet ready. We will focus our attention in 2014 on improving their readiness and continuing our research into how we measure outcomes.

2. Promote Responsible Microfinance. Better define and enhance the concept of Responsible Microfinance among key stakeholders (public and private investors, donors, networks) as well as the media and the interested public.

Microfinance operates in a rapidly evolving environment, with wide variations country-by-country.

The sector itself continues to evolve through both traditional microcredit and savings and the expansion of product lines to new financial (e.g., microinsurance) and non-financial (e.g., health) services. International funding continues to grow, although measurement of the goal has broadened to encompass the wider goal of financial inclusion.2 Funders committed at least $29 billion in 2012 to support financial inclusion – an estimated increase of 12 percent since 2011.3 The proportion of that that went specifically to microfinance is unclear.

On the other hand, the microfinance sector has significant areas of vulnerability. The 2013 Microcredit Summit Campaign report found that between 2010 and 2011 the total number of poorest clients and microfinance clients globally dropped for the first time since data started being tracked (137 million to 134 million and 205 million to 195 million, respectively), with fallout from the crisis in India and the global economic crisis cited as major factors.4

2

According to the Consultative Group to Assist the Poor (CGAP), the development community has sustained support for microfinance but broadened funding to encompass the wider goal of financial inclusion.

3 http://www.cgap.org/publications/trends-international-funding-financial-inclusion 4 http://stateofthecampaign.org/the-report/reaching-fewer/

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 9 of 16

Microfinance faces numerous additional challenges, given that:  In certain markets, companies with poor practices (such as payday-lenders) have self-identified as “microfinance,” resulting in general confusion about the field and a poor reputation;  In certain countries, regulators and governments have responded to instances of poor practices with harsh regulatory requirements that stifle growth;  While microfinance enjoys a generally positive reputation in many countries, many news stories center on scandals or impact evaluations showing disappointing results.

In short, there is a risk that enthusiasm for microfinance will fade. The highly publicized issues (over-indebtedness, poor treatment of clients, allegations of high interest rates and excessive profits and lack of data about impact) point to a need for systematic efforts among industry players (1) to institute high standards and improve the performance of the field as a whole while (2) processing the information about impact that points to the need to broaden services. These are both included in our on-the ground work related to Objective 1 above and can only be accomplished by building strategic partnerships with the other major stakeholders in the sector. As important, however, is building the infrastructure and approach to effectively communicate these efforts externally.

3. Promote Responsible Microfinance in Specific Countries. Contribute to the dialogue and the implementation of Responsible Microfinance within specific countries when there is a crisis or when there is an opportunity to assist.

There are instances when a policy issue arises in a specific country in which several members of the Working Group are operating. Sometimes it is possible for us to collectively work to help prevent problems from escalating or to assist the industry to raise its voice effectively. As an example, early in 2013, the government of Zambia suddenly imposed an interest rate cap of 42 percent. The three Working Group members that have operations in the country (FINCA, VisionFund and Opportunity International) began meeting swiftly to discuss how to respond. They led an industrywide effort to cease lending altogether. The government responded by requesting the industry to make a counter proposal. Ultimately the government adjusted its proposal, and now most MFIs are able to operate sustainably. In other instances, there are countries in which a significant change in the regulatory status of the microfinance industry is in the making, and it is possible for the Working Group to influence the outcome of the change. For instance, in September 2013, the Reserve Bank of India set up a Committee on Comprehensive Financial Services for Small Businesses and Low Income Households and tasked it with framing a clear and detailed vision for financial inclusion and financial deepening in India. Recognizing that the Committee offered an excellent opportunity to set out a strategic platform to guide Indian policy going forward, the Working Group joined together with Financial Inclusion 2020 and the Smart Campaign to write a detailed letter of recommendations to the Committee.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 10 of 16

The letter was well received by the Committee, and many (but not all) of the Committee’s recommendations are in line with suggestions in the letter.

In both cases, these are essentially opportunities for the Working Group, operating through its local counterparts and/or contacts, to add value in the particular set of circumstances. Thus, the Working Group needs to have a capacity to continuously monitor events around the globe and be prepared to respond quickly when appropriate.

4. Increase sharing across our networks. Formalize the functioning peer groups such that each develops an annual plan with objectives for sharing policies, practices and solutions within their functional areas and reports back to the Working Group on their accomplishments.

One of the strategies that the Working Group is using to strengthen member networks is to foster multiple functional peer groups alongside it. Currently, the following peer groups are operating:  Microfinance Communications Council

 Risk Management Group

 Human Resources Committee

 Council of Counsels Subgroup

 Finance/Tax Group

 Social Performance Group These peer groups enhance sharing across our networks in a variety of ways. For instance, the Human Resources peer group is sharing information related to their respective compensation policies. The Social Performance Group undertook a Beta Test of the USSPM last year that provided important input into the final adoption of the standards. The Council of Counsels Subgroup, working with pro bono attorneys, is designing model legislation related to client protection that could be offered to regulators in specific countries when appropriate.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 11 of 16

5. Build Capacity. Enhance the Working Group capacity to add value within the sector.

The Working Group is part of a larger, industry-wide effort to renew the industry by establishing and achieving standards related to practice. For several years we have been organizing with others to significantly improve standards and practices within our industry. We are focused not only on generating new insights and best practices but also on activating scaled uptake of those practices.

In 2014, the Working Group will take steps to continue to increase its capacity. In 2013, it hired Anne Hastings, former CEO of Fonkoze, as the Manager of the Working Group and Maura Hart as the part-time Manager of Communications. Further steps to increase capacity will continue in 2014.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 12 of 16

The Indicators We Use To Measure Our Success 1. Practice Responsible Microfinance: Embed the principles of client protection, pricing transparency and social performance management in the processes of our 230 plus affiliates that make up our networks over the next 3-5 years. a. Goals have been set and achieved for the number of MFIs that: i. Are certified by the Smart Campaign ii. Perform well on a Social Rating iii. Define the outcomes they are seeking, measure whether they achieve them and modify their services and products based on this information iv. Have an in-depth social performance or client protection assessment by a third party v. Conduct a self-assessment and share the results with us vi. Receive training in client protection, pricing transparency and/or social performance management vii. Participate in an analysis and comparison of their prices in relation to others in the market b. A cross-network strategy related to outcomes has been formulated and executed.

2. Promote Responsible Microfinance. Better define and enhance the concept of Responsible Microfinance among key stakeholders (public and private investors, donors, networks) as well as the media and the interested public. a. A formal or informal assessment of the strengths and weaknesses of the current understanding of Responsible Microfinance is completed, and the key target groups where strengthening is most needed are identified. b. Strategic relationships are built with other stakeholders (such as investors and donors) that bring them into partnership with us in promoting Responsible Microfinance among our partners/investees. This means identifying concrete mechanisms that together we can use to encourage MFIs to embed the evolving standards for client protection, pricing transparency and social performance management into their practices. c. The channels of communications (social media, conventional media, websites, events, etc.) that each of our members currently have in place are catalogued and coordinated, thereby leveraging the power of those channels for greater impact. d. A comprehensive communications strategy is developed in cooperation with the Microfinance Communications Council to advocate for Responsible Microfinance among stakeholders and interested publics.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 13 of 16

3. Promote Responsible Microfinance in Specific Countries. Contribute to the dialogue and the implementation of Responsible Microfinance within specific countries when there is a crisis or when there is an opportunity to assist. a. The monthly Heat Map of the global microfinance press is maintained. b. Relationships are developed with the U.S. government agencies that can help us in analyzing country situations and/or introduce us to in-country contacts. c. The specific countries that might benefit from Working Group engagement are identified. The situation in those countries is monitored and assessed, and appropriate responses are executed. d. Model microfinance legislation/regulation related to client protection is developed for use by countries creating or modifying regulation in this arena.

4. Increase sharing across our networks. Formalize the functioning peer groups such that each develops an annual plan with objectives for sharing policies, practices and problem solutions within their functional areas and reports back to the Working Group on their accomplishments. a. The peer groups meet regularly (for example, every four to six weeks) by conference call and face-to-face at least once per year. b. Peer groups have developed a set of objectives for the year and reported to the Working Group at least once each year. c. Representatives of the Working Group have checked in with their peer groups at least quarterly and their objectives and reports have been reviewed and approved. d. All Working Group member networks have participated in those peer groups relevant to them.

5. Build Capacity. Enhance the Working Group capacity to add value within the sector. a. An informed decision about whether to increase the number of members in the Working Group has been made and acted upon. b. A part-time intern has been engaged to work in the Secretariat. c. The necessary infrastructure for a future communications campaign has been established. d. The Strategic Plan has been implemented and at least 80 percent of all objectives have been achieved within the next 2-3 years. e. A fundraising goal based on the Strategic Plan has been set and the fundraising targets are achieved.

Microfinance CEO Working Group 2014 Strategic Plan

February 2014 Page 14 of 16

Where We Are Headed At this moment, microfinance has an opportunity to build on past successes and learn from and respond to the challenges it faces in order to be a more responsive and responsible industry. By taking sincere and systematic action together, we believe we can build more successful financial institutions that help change the lives of the people we serve. We are committed to doing that within our own institutions, but also aspire to influencing the entire sector. We have and will continue to build strategic relationships with other stakeholders, including investors, donors, networks, standard setting initiatives, and providers. We will also continue to seek out exciting new advances in the industry and speak out against unfair microfinance practices or distortions. We hope we can count on your solidarity with us in these efforts.

Photo Captions:

Page Page 1 (clockwise from top left)

Page 3 Page 4 Page 5 Page 6 Page 7 Page 10 Page 11 Page 12 Page 15

Microfinance CEO Working Group 2014 Strategic Plan

Organization FINCA International VisionFund International Freedom from Hunger FINCA International Women’s World Banking Accion Freedom from Hunger/Grameen Foundation Freedom from Hunger Accion Opportunity International Pro Mujer Women’s World Banking Pro Mujer Opportunity International VisionFund International

MFI FINCA Guatemala Kondo Jigima

Country Guatemala India Mali

Equity Bank Ltd. Accion Microfinancas Fonkoze

Kenya Brazil Haiti

USOFORAL Swadhaar

Senegal India Uganda Nicaragua Morocco Nicaragua Uganda Malawi

Al Amana Communal Bank Salima

February 2014 Page 15 of 16

The Microfinance CEO Working Group is a collaborative effort by a number of leading international organizations that promote microfinance around the world.

The Microfinance CEO Working Group consists of the leaders of eight international microfinance organizations:

With special thanks for support from: